Daily Rate Update: March 9th-13th

U.S. stocks are rebounding today after yesterday’s steep plunge. Central bank action from around the globe is a major reason for stocks moving higher around the globe at the expense of bonds. The U.S. Fed has begun to inject $1.5T of liquidity into the system, along with stimulus measures from Japan, China, Norway, Sweden, Indonesia and South Korea. Apple shares were upgraded and the stimulus package from Congress to battle the coronavirus fallout are also adding to the big upside moves seen in the U.S. stock markets early on.

Federal Reserve members will gather next week for the scheduled two-day Federal Open Market Committee meeting beginning on Tuesday and ends Wednesday with the 2:00 p.m. ET release the monetary policy statement. Fed Fund Futures are showing a 100% chance of a 50bp cut with a 75% chance of a full point cut at the meeting. Aside from the rate cut move, the statement could reveal additional stimulus measures – all designed to help the economy and stocks.

Consumer Sentiment edged lower in early March falling to 95.9 from the 101.0 recorded in February. The index could move lower in coming months due to the fallout from the coronavirus. “The data suggest that additional declines in confidence are still likely to occur as the spread of the virus continues to accelerate,” said Jim Curtin, chief economist of the survey.

Mortgage rates edged higher this week but remain at historic lows, reports Freddie Mac. The 30-year fixed-rate mortgage rose seven basis to 3.36% with 0.7 in points and fees. A year ago the rate was 4.31%. “As refinance applications continue to surge and lenders work to manage capacity, the 30-year fixed-rate mortgage ticked up from last week’s all-time low,” said Sam Khater, Freddie Mac’s Chief Economist. “Mortgage rates remain at extraordinary levels and many homeowners are smartly weighing their options to refinance, potentially saving themselves money.”

A lot happened overnight to suggest there will be near-term economic pain and a hit to gross domestic product. The NBA has suspended the season until further notice and that story alone has ripple effects all the way down to hourly employees. Major conferences, festivals, sporting events are being postponed around the country which directly impacts the workers and vendors within the respective events. Companies and schools are also closing around the country and the trickle-down effect on local small businesses will be impacted. One can imagine that retail businesses will also suffer in the near-term.

Coronavirus update: Here in the U.S., there are 1,364 cases of the virus that includes 63 new cases with 38 total deaths. There are 129,313 cases of the virus reported worldwide, 4,749 deaths while 68,661 having recovered from the virus. Italy continues to be on total lock down. Current risk assessment from the CDC: For the majority of people, the immediate risk of being exposed to the virus that causes COVID-19 is thought to be low. There is not widespread circulation in most communities in the United States.

Mortgage rates continued to decline in the latest week as the coronavirus casts a cloud of uncertainty over the markets and investors rush into the safe-haven of the bond markets. The Mortgage Bankers Association reports that the 30-year fixed-rate mortgage fell 10 basis points to 3.47% with 0.27 in points for the the week ending March 6, 2020. Low rates have spurred on mortgage application activity. The Market Composite Index, a measure of total mortgage application volume, surged 55%, the Refinance Index soared 79% while the Purchase Index was up 6%.

Consumer inflation remained subdued in February and has been mild since the Great Recession ended more than 10 years ago. The Consumer Price Index (CPI) rose 0.1% fueled by rising costs by more expensive food. On an annual basis, CPI rose 2.3%. When stripping out volatile food and energy, the so-called Core CPI increased by 0.2% and 2.4% annually.

Coronavirus update: Here in the U.S., the CDC reports that there are more than 1,000 cases of the virus with 28 total deaths. There are 121,000 cases of the virus reported worldwide, 4,379 deaths while 66,909 have recovered from the virus. Italy continues to be on total lock down. Current risk assessment from the CDC: For the majority of people, the immediate risk of being exposed to the virus that causes COVID-19 is thought to be low. There is not widespread circulation in most communities in the United States.

Credit availability modestly declined in February as both conforming and jumbo segments of the market saw a decline. The MBA reports that its Mortgage Credit Availability Index (MCAI) fell 0.3% to 181.3 last month. A decline in the MCAI indicates that lending standards are tightening, while increases in the index are indicative of loosening credit. The MCAI is calculated using several factors related to borrower eligibility (credit score, loan type, loan-to-value ratio, etc.).

Housing sentiment remained elevated in February despite a slight dip from January. Fannie Mae reports that its Home Purchase Sentiment Index (HPSI) declined 0.5% to 92.5 but remained near its survey high of 93.8. The percentage of Americans who say it is a good time to buy remained the same this month at 59%, while the percentage of Americans who say it is a good time to sell increased from 66% to 67%. Fannie Mae said the markets have not yet seen the fallout from the coronavirus as volatility may be seen in the months ahead as the virus plays out.

Coronavirus update: More than 114,000 cases of the virus have been reported worldwide with more than half of those infected already recovered, reports Johns Hopkins. Four thousand people around the globe have died from the infliction. Italy is now on total lockdown. Current risk assessment from the CDC: For the majority of people, the immediate risk of being exposed to the virus that causes COVID-19 is thought to be low. There is not widespread circulation in most communities in the United States.

Oil prices plunged on Monday due to the failure of Russia and Saudi Arabia to cut production. West Texas Intermediate oil fell $7 to $34/barrel as the coronavirus fears have also impacted prices due to demand fears. The average national price for a gallon of regular gasoline has fallen to $2.38 and prices will fall further this week. This decline in gas prices will provide purchasing power to the consumer as it essentially serves as a tax cut.

U.S. stocks are plunging once again today as the oil markets melt down and as the coronavirus fears weigh on economic growth. The Dow Jones Industrial Average has lost nearly 20% from the all-time high of 29,568 hit on February 12 to the low seen this morning of 23,818.

Coronavirus update: About 564 people in the U.S. have been confirmed to have the virus. Of those, 22 people have died, with deaths in Washington (18), California (1) and Florida (2). (Globally, more than 111,000 cases have been confirmed, with 3,892 deaths.) John’s Hopkins Center says that 62,000 people worldwide have recovered from the virus. Current risk assessment from the CDC: For most people (in the U.S.), the immediate risk of being exposed to the virus that causes COVID-19 is thought to be low. This virus is not currently widespread in the United States.